Economic Diversification and Price Stability in Nigeria
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Date
2025-03-31
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Department of Finance, Ekiti State University
Abstract
This study explores the dynamics of price stability in Nigeria between 1991 and 2022, focusing on the
critical role of economic diversification. Using an Autoregressive Distributed Lag (ARDL) model, this
study analyses the short and long-run dynamics. In the short run, the findings reveal that past price
stability positively influences current stability, while investment tends to destabilize prices. Non-oil gross
domestic product, in the long run, positively influences price stability, therefore suggesting that economic
diversification can contribute to greater stability. However, the study finds that non-oil exports,
investment, and the exchange rate negatively impact price stability, implying that while these factors may
boost economic activity, they also introduce volatility. The findings underscore the need for Nigerian
policymakers to focus on diversifying the economy, managing exchange rate volatility, and crafting
targeted investment policies to enhance long-term price stability.
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Keywords
Economic Diversification, Autoregressive Distributed Lag (ARDL) Model, Non-oil GDP, Exchange Rate, Price Stability.